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Asked Jan 18, 2020
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  • Graph 3: Draw a production possibilities model and using your own numbers, explain the concept of the law of increasing opportunity cost.
  • Graph 4: Draw a production possibilities model for North Korea and label the Y axis Guns, and the X axis Butter.  Put two points, A and B, on the curve.  Using the two points, explain the concept of government (or market) failure.
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Expert Answer

Step 1

As per the rules, we only answer one question at a time. Since there is no information on which question to be answered, we are answering the first question. Kindly post the other question separately to get it answered.

To explain the concept to increasing opportunity cost using production possibilities frontier.

Step 2

Suppose that the economy produces only guns and butter. The production possibilities frontier is concave to the origin because of increasing opportunity costs which is due to increasing marginal rate of substitution.

The opportuni...

Economics homework question answer, step 2, image 1
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